WEBVTT - A Jobs Day Breakdown and Outlook for Rate Cuts 0:00:00.080 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.960 --> 0:00:15.560 This is the Bloomberg Surveillance Podcast. I'm Tom Keene along 0:00:15.600 --> 0:00:18.960 with Paul Sweeney. Join us each day for insight from 0:00:18.960 --> 0:00:23.119 the best in economics, finance, investment, and international relations. You 0:00:23.160 --> 0:00:26.520 can also watch the show live on YouTube. Visit the 0:00:26.520 --> 0:00:31.280 Bloomberg Podcast channel on YouTube to see the show weekday 0:00:31.280 --> 0:00:34.320 mornings from seven to ten am Eastern from our global 0:00:34.360 --> 0:00:39.000 headquarters in New York City. Subscribe to the podcast on Apple, Spotify, 0:00:39.360 --> 0:00:42.920 or anywhere else you listen, and always I'm Bloomberg Radio, 0:00:43.080 --> 0:00:48.400 the Bloomberg Terminal, and the Bloomberg Business App. Joining us 0:00:48.479 --> 0:00:51.640 now the one person I wanted to talk to her 0:00:51.680 --> 0:00:54.960 commercial free year through the fur Good morning, huge audience 0:00:55.000 --> 0:00:57.880 on YouTube. Good morning to all of you Lindsey Pigs. 0:00:57.880 --> 0:01:02.080 It joins us who's pushed way again consensus and it said, 0:01:02.120 --> 0:01:06.160 this is a fed of stability or even rate increase. 0:01:06.760 --> 0:01:09.720 You look like a genius this morning. Are you going 0:01:09.800 --> 0:01:12.480 to look like a genius in thirty days for the 0:01:12.560 --> 0:01:14.120 report come July? 0:01:16.520 --> 0:01:19.120 Well, I think so. Even if we did see a 0:01:19.520 --> 0:01:22.960 hotter than expected print in even the next one or 0:01:23.000 --> 0:01:27.000 two inflation reports, it's not going to be enough data 0:01:27.040 --> 0:01:31.839 to convince the FED, particularly against very clear tight conditions 0:01:31.880 --> 0:01:35.039 in the labor market. And the most concerning component of 0:01:35.080 --> 0:01:37.840 this report for the FED is going to be that 0:01:38.000 --> 0:01:42.200 wage component. We continue to see pressure on wages as 0:01:42.280 --> 0:01:45.720 labor demands outpaces labor supply. And this is not something 0:01:45.720 --> 0:01:48.480 that's going to be fixed overnight. This is a rebalancing 0:01:48.920 --> 0:01:51.560 that is going to have to occur over months, a 0:01:51.680 --> 0:01:54.559 prolonged period. And so when we look to the FED, 0:01:54.560 --> 0:01:58.920 who's telling us they need very clear evidence of disinflation, 0:01:59.600 --> 0:02:03.920 many months of that evidence that says that while raycut 0:02:04.040 --> 0:02:08.040 may be eventual, eventually does appear to increasingly be a 0:02:08.120 --> 0:02:09.519 twenty twenty five event. 0:02:10.320 --> 0:02:12.600 You know, Tom, This top Live blog continues to be 0:02:12.680 --> 0:02:14.440 my go to when you get these big things. And 0:02:14.480 --> 0:02:17.280 here's something just posted there. The two hundred and seventy 0:02:17.280 --> 0:02:20.720 two thousand payroll gain was bigger than every last one 0:02:20.760 --> 0:02:23.560 of the seventy seven estimates in the Bloomberg survey. So 0:02:23.960 --> 0:02:29.840 there you go, Lindsey, where's this demand for labor coming from? 0:02:29.880 --> 0:02:31.320 I mean, who's hiring all these people? 0:02:33.440 --> 0:02:36.440 Well, I think it's pretty broad based. There isn't one 0:02:36.520 --> 0:02:40.320 sector of the economy that's booming. What we're seeing is 0:02:40.360 --> 0:02:44.840 an overall steady level of expansion across several key categories 0:02:44.880 --> 0:02:47.600 of the economy. Now again, I don't want to overseell 0:02:47.680 --> 0:02:50.400 what we are seeing in the labor market or the 0:02:50.440 --> 0:02:54.680 broader domestic economy, because we are starting to see somewhat 0:02:54.680 --> 0:02:58.800 of a rebalancing. Labor market conditions. Absolutely, they're still tight, 0:02:59.240 --> 0:03:02.360 but they are somewhat less type than what we saw 0:03:02.800 --> 0:03:04.480 not just at the start of the year, but over 0:03:04.520 --> 0:03:07.960 twenty twenty two, twenty twenty three. So we are starting 0:03:08.000 --> 0:03:11.639 to see a rebalancing. But the problem is the overall impact, 0:03:12.000 --> 0:03:16.080 or that that rebalancing is occurring at a much slower 0:03:16.200 --> 0:03:20.200 case than the market or specifically the FED had anticipated. 0:03:20.880 --> 0:03:23.160 Still positive, but we are starting to see that second 0:03:23.160 --> 0:03:24.000 derivative decline. 0:03:24.160 --> 0:03:25.880 And Paul aw you get out the HP twelve C. 0:03:26.240 --> 0:03:28.000 I mean, you know, if you have pigs on, you 0:03:28.000 --> 0:03:30.440 got to get out the HP twelve C. And I 0:03:30.480 --> 0:03:32.880 do the three months moving average, which in March was 0:03:32.919 --> 0:03:37.480 a big number OMG. April was a lesser number. And 0:03:37.520 --> 0:03:40.400 now we just got another big number. Lindsey, I'm rocking 0:03:40.520 --> 0:03:44.920 two hundred and fifty thousand ish over the last ninety 0:03:45.040 --> 0:03:50.040 days per month six years ago. That's a boom statistic. 0:03:50.200 --> 0:03:54.320 Are we in a boom labor economy? 0:03:54.360 --> 0:03:57.760 Well, I do cost and against reading in too much 0:03:57.880 --> 0:04:01.280 to the headline payroll number, because we are starting to 0:04:01.280 --> 0:04:05.000 see somewhat of divergence between the payrolls and the household survey. 0:04:05.440 --> 0:04:09.600 Payrolls are consistently reaching new highs month after months, but 0:04:09.720 --> 0:04:13.400 the household survey really has shown somewhat of fatigue plateauing 0:04:13.800 --> 0:04:16.200 over the past I would say, six to eight months. 0:04:16.480 --> 0:04:19.880 The disconnect, of course reflecting the fact that we consistently 0:04:20.040 --> 0:04:24.200 underaccount the working age population, particularly now as we see 0:04:24.240 --> 0:04:28.279 these large flows of immigration coming into the economy, legal 0:04:28.320 --> 0:04:29.160 and illegal. 0:04:29.520 --> 0:04:30.320 But also what. 0:04:30.240 --> 0:04:32.960 We're seeing is this shift in the demand or the 0:04:33.080 --> 0:04:36.240 type of jobs being created in terms of full time 0:04:36.360 --> 0:04:39.200 versus part time. Now, I haven't dug into the details 0:04:39.240 --> 0:04:43.520 of this report specifically, last month was almost entirely full time, 0:04:43.880 --> 0:04:47.080 but if we go prior to that six to eight months, 0:04:47.440 --> 0:04:51.640 that was almost entirely part time employment, which, as we know, 0:04:51.760 --> 0:04:54.599 part time hires typically have more than one gig. And 0:04:54.640 --> 0:04:56.440 then of course you're counted more than once in the 0:04:56.480 --> 0:05:01.640 payroll report, which could artificially inflate. That number again still positive, 0:05:02.000 --> 0:05:05.240 but I do think there's some underlying signs of the 0:05:05.279 --> 0:05:10.320 economy starting to cool that that rebalancing. As I mentioned, so. 0:05:10.320 --> 0:05:14.120 We had four point one percent average hourly earnings year 0:05:14.120 --> 0:05:16.040 of year four point one percent. That's well above the 0:05:16.080 --> 0:05:19.520 three point nine percent consensus. Last month was also revised 0:05:19.560 --> 0:05:22.440 a little bit higher. Wage inflation, Is that a thing? 0:05:24.800 --> 0:05:27.960 Well, it's certainly a concern, absolutely, and concern not just 0:05:28.040 --> 0:05:32.120 for the FED, but wages. Surprisingly strong wage data for 0:05:32.160 --> 0:05:35.120 the BOE the ECB. That was also noted as a 0:05:35.160 --> 0:05:38.080 concern for the pathway going forward. So even as we 0:05:38.160 --> 0:05:41.760 see some of the supply side components providing ample relief 0:05:41.880 --> 0:05:45.800 to inflation as economy is reopened, tradelines come back online 0:05:45.839 --> 0:05:48.800 in the aftermath of COVID, what we're seeing is some 0:05:48.839 --> 0:05:52.719 of these variables under the purview of global central banks 0:05:53.080 --> 0:05:56.680 are showing less improvement as we have allowed in some 0:05:56.720 --> 0:06:00.360 ways inflation to become entrenched in the economy, with central 0:06:00.360 --> 0:06:03.520 banks sitting on the sidelines and allowing above target inflation 0:06:03.720 --> 0:06:05.360 for a long period of time. 0:06:05.560 --> 0:06:07.919 Lindzi, when you were taking your PhD, you had the 0:06:08.040 --> 0:06:12.279 unenviable task of studying the terror for Michigan Claudia some 0:06:13.120 --> 0:06:16.839 and of course Claudia has been forceful that we don't 0:06:16.880 --> 0:06:20.880 have enough evident data for recession. Clearly she's been right. 0:06:21.000 --> 0:06:23.719 She's on with us in a moment, folks. Clearly Lindsay 0:06:23.800 --> 0:06:27.559 Piggs has been right that the economy is much better. 0:06:27.600 --> 0:06:33.000 But how bifurcated is the economy now between the haves 0:06:33.360 --> 0:06:34.279 and the have nots. 0:06:36.520 --> 0:06:38.640 Well, I would push back. I don't think the storyline 0:06:38.720 --> 0:06:40.400 is between the rich and the poor, the have and 0:06:40.400 --> 0:06:42.640 the have not. I think the divide is between the 0:06:42.680 --> 0:06:46.360 asset holders and the non asset holders. Because what we've 0:06:46.400 --> 0:06:49.480 seen is while the average American household is still outspending, 0:06:49.880 --> 0:06:54.000 they are feeling pain from higher prices, higher borrowing costs, 0:06:54.040 --> 0:06:57.560 the resumption of student debt payments. But there's another category 0:06:57.600 --> 0:07:01.920 of consumers that have experienced asset increase in net wealth 0:07:02.320 --> 0:07:05.720 to the tune of twelve trillion dollars over the past year. 0:07:06.200 --> 0:07:09.479 And that's possible thanks in Part two, this massive increase 0:07:09.520 --> 0:07:13.240 in asset prices via the equity market, via the housing market. 0:07:13.760 --> 0:07:16.280 So when we paint with a broad brush, the consumer 0:07:16.360 --> 0:07:19.880 remains resilient, that's very much true, but the level of 0:07:19.960 --> 0:07:24.240 resiliency is very much divided between the asset holders and 0:07:24.280 --> 0:07:26.320 the non asset holders in this economy. 0:07:26.640 --> 0:07:29.040 Lindsey think of someone doctor figs. It was Stifel here, 0:07:29.080 --> 0:07:31.920 and of course she's done a yeoman's job of pushing 0:07:31.960 --> 0:07:35.280 against they're going to cut, cut, cut, just saying everybody 0:07:35.360 --> 0:07:39.240 calm down and wait for the data to let you 0:07:39.320 --> 0:07:41.480 know where we are. Now. We got Claudia sim coming 0:07:41.560 --> 0:07:45.360 up in moments because of is it Roaring Kitty? Do 0:07:45.440 --> 0:07:46.160 I have that right now? 0:07:46.200 --> 0:07:46.440 I don't know. 0:07:46.840 --> 0:07:49.560 Jess's going to brief here. I was like, you know, 0:07:49.600 --> 0:07:51.520 why do we need to talk to Jess Metton about 0:07:51.640 --> 0:07:54.800 Roaring Kitty? And the answer is we've gone from sixty 0:07:54.960 --> 0:07:58.280 seven to thirty six. We're now breaking down to a 0:07:58.320 --> 0:08:01.840 new loath this morning, so we'll get to Jess Matton. Yeah, 0:08:01.960 --> 0:08:02.880 on Roaring Kiddy. 0:08:03.200 --> 0:08:05.880 Game stop down twenty three percent pre market trading time. 0:08:06.360 --> 0:08:08.240 They had some news that they filed to sell up 0:08:08.240 --> 0:08:10.160 the seventy five million shares to take advantage of this 0:08:10.520 --> 0:08:12.280 what had been one hundred and sixty percent increase in 0:08:12.280 --> 0:08:12.880 the stop the year. 0:08:12.880 --> 0:08:16.160 Speaking of Hello Kitty, Claudia sam joins right now where 0:08:16.200 --> 0:08:20.000 there cats that she heards on a weekend basis. Claudia Sam, 0:08:21.080 --> 0:08:25.440 of course, providing all sorts of important economic analysis, hugely 0:08:25.480 --> 0:08:32.839 influential right now with New Century Advisors. Claudia, you nailed it. 0:08:33.400 --> 0:08:38.080 Just everybody's saying, Claudia Sam's right, recession, recession, and you're like, 0:08:38.400 --> 0:08:42.160 wait for the data. Is this a numph of Is 0:08:42.200 --> 0:08:46.600 this enough of an oomph positive jobs report where you're 0:08:46.640 --> 0:08:48.560 not looking out to the first week of July, but 0:08:48.640 --> 0:08:51.600 you've got to get out further to get any kind 0:08:51.640 --> 0:08:54.239 of caution on this economy. 0:08:55.120 --> 0:08:58.120 This is good news today. Jobs days have been good 0:08:58.160 --> 0:09:01.480 news in the past couple years. We see a resilient 0:09:01.559 --> 0:09:05.320 labor market. We have had a job full recovery for 0:09:05.480 --> 0:09:09.400 the first time in a very long time, and that's good. 0:09:10.280 --> 0:09:13.760 So you know, I understand that sometimes markets think good 0:09:13.760 --> 0:09:16.200 news is bad news and it's bad news for the Fed. No, 0:09:16.320 --> 0:09:18.200 this is good news for the Fed. People have jobs. 0:09:18.240 --> 0:09:18.720 It is good. 0:09:19.200 --> 0:09:22.079 I mean, I mean the FED starting when they look 0:09:22.160 --> 0:09:24.959 like a genius right now in terms of the parlor game, 0:09:25.000 --> 0:09:26.920 which I don't care about, but the overlay of that 0:09:27.840 --> 0:09:31.679 is a sub two percent GDP growth. Is that embedded 0:09:31.720 --> 0:09:35.640 into your study now where you're looking at finally real 0:09:35.760 --> 0:09:39.160 GDP growth actually pulls down. 0:09:39.920 --> 0:09:43.400 So I will channel FED chair J. Powell and say 0:09:43.400 --> 0:09:46.200 we look at the totality of the data. Right, we 0:09:46.240 --> 0:09:48.440 have to bring all the pieces together. You can't just 0:09:48.480 --> 0:09:50.720 look at the labor market and say recession or not. 0:09:50.880 --> 0:09:53.160 I don't lean just on the song rule and it's 0:09:53.320 --> 0:09:56.640 my rule, right, So, and it's very important a couple 0:09:56.600 --> 0:09:58.280 of pieces. Always look under the hood. 0:09:58.720 --> 0:09:58.880 Right. 0:09:58.920 --> 0:10:00.800 We need to see the consumer we're keep going. We 0:10:00.840 --> 0:10:03.960 need to see the businesses investing. We've largely seen that 0:10:03.960 --> 0:10:07.600 it's going to be bumpy, and never take one month 0:10:07.679 --> 0:10:10.200 and run with it, like, we really have to look 0:10:10.600 --> 0:10:13.439 three months, six months, and if you do that story, 0:10:13.559 --> 0:10:16.800 you've got the moderation today is not throwing that off, 0:10:17.040 --> 0:10:20.600 but it's a good moderation. It's a sustainable path we 0:10:20.640 --> 0:10:21.000 are on. 0:10:21.320 --> 0:10:23.319 Paul, I'm going to go this three month moving average 0:10:23.400 --> 0:10:26.800 is like two fifty and firm payrolls ten years ago. 0:10:26.880 --> 0:10:28.959 That was a boom mcconna, that was a Boomcconnay, it 0:10:29.000 --> 0:10:31.600 looks like we're fully employed. I guess let's look at 0:10:31.640 --> 0:10:34.440 the wages here, Claudia. We had last month we revised 0:10:34.520 --> 0:10:36.920 up a little bit to four percent this month that 0:10:36.960 --> 0:10:40.280 came in at four point one percent on an annualized basis, 0:10:40.679 --> 0:10:42.560 is that wage inflation. Are we looking at the wage 0:10:42.559 --> 0:10:43.200 inflation there? 0:10:45.200 --> 0:10:48.880 We have seen no evidence of a wage price spiral 0:10:49.200 --> 0:10:51.800 its entire cycle, and if you didn't see it in 0:10:51.840 --> 0:10:54.680 twenty twenty two, I have there is no story for 0:10:54.760 --> 0:10:58.040 it right now. Again, we need a resilient economy. We 0:10:58.160 --> 0:11:01.760 need paychecks out there so people keep spending. The FED 0:11:01.840 --> 0:11:03.960 is going to wait, that's just kind of how they roll. 0:11:04.400 --> 0:11:07.480 So we want to make sure that that patient side 0:11:07.520 --> 0:11:10.640 does not take us all down. And it looks like 0:11:10.960 --> 0:11:14.160 they got some resilience and that's a good big picture, 0:11:14.280 --> 0:11:16.440 not just for the Fed and their waiting game. 0:11:17.559 --> 0:11:20.960 So Chloudia, how do you think about the immigration, both 0:11:21.000 --> 0:11:23.559 legal and illegal and how that impacts some of the 0:11:23.640 --> 0:11:25.240 data we've been seeing over the last I don't know, 0:11:25.280 --> 0:11:26.839 six or twelve months, it seems to be getting a 0:11:26.880 --> 0:11:27.960 little bit more play out there. 0:11:29.360 --> 0:11:32.319 So, first, from the lens of the economy, the immigration, 0:11:32.440 --> 0:11:35.840 the pickup and immigration to this country has been good 0:11:36.040 --> 0:11:39.560 for the economy. We had widespread labor shortages and those 0:11:39.679 --> 0:11:43.000 really buy and large are taken care of. Wasn't just immigrants. 0:11:43.080 --> 0:11:45.520 We had women coming back strong, we had other people 0:11:45.559 --> 0:11:48.640 and marginalized groups coming in. But we needed workers. They 0:11:48.640 --> 0:11:52.760 weren't displacing workers. They were filling job that weren't getting built. 0:11:53.080 --> 0:11:55.200 That's good, of course. Bigger picture, there's a you know, 0:11:55.280 --> 0:11:57.480 conversation to have about how we do that in an 0:11:57.640 --> 0:12:01.240 orderly way right now. So that's the economy what you 0:12:01.320 --> 0:12:04.920 asked about with the data. Throw one more measurement challenge 0:12:05.000 --> 0:12:07.480 at the beer of labor statistics, right like, it is 0:12:07.559 --> 0:12:10.120 just very hard to survey these people. They might show 0:12:10.200 --> 0:12:12.160 up in household survey, they might not. They might show 0:12:12.240 --> 0:12:15.240 up an establishment survey. So but we have a lot 0:12:15.280 --> 0:12:17.840 of things that are making the data hard to read 0:12:18.200 --> 0:12:19.000 right now, a. 0:12:18.960 --> 0:12:22.600 Threat to society. Paul is always an economists that pulls 0:12:22.600 --> 0:12:26.559 out Miriam Webster. Claudia Sam with a blistering essay for 0:12:26.640 --> 0:12:32.000 Bloomberg Opinion here in recent days. Claudia Sam on inflation, 0:12:32.840 --> 0:12:34.280 What did you learn in your study? I mean, of 0:12:34.320 --> 0:12:37.160 course you have to quote University of Michigan statistics. I 0:12:37.200 --> 0:12:40.920 get it, it's the franchise out there. But Claudia, what 0:12:41.040 --> 0:12:43.800 is the character of the inflation into this summer? 0:12:45.720 --> 0:12:45.880 Right? 0:12:45.960 --> 0:12:48.839 So the point of the piece was, yes, there is 0:12:48.960 --> 0:12:51.520 when we talk about inflation. People are upset about inflation, 0:12:51.640 --> 0:12:54.680 and economists try and convince the noise getting better. This 0:12:54.880 --> 0:12:58.040 is more than economics, right, because we are talking about 0:12:58.040 --> 0:13:00.440 the same thing and increase in prices. That is an 0:13:00.480 --> 0:13:03.880 economic phenomenon, But there's a lot more that's getting wrapped 0:13:03.960 --> 0:13:05.760 up in inflation. And if we're going to have a 0:13:05.760 --> 0:13:08.680 productive debate, we need to get the economics sorted out 0:13:08.800 --> 0:13:11.400 with the economist in that bin, and then there's another 0:13:11.440 --> 0:13:14.320 discussion and bring in other experts, like let's stop pretending 0:13:14.360 --> 0:13:15.679 this is all about the economy. 0:13:17.040 --> 0:13:20.080 So Claudia, where does this federal reserve go from here? 0:13:20.120 --> 0:13:23.200 It sounds like and I'm looking at the market here, boy, 0:13:23.280 --> 0:13:25.960 they can just wait, no problem waiting here and maybe 0:13:25.960 --> 0:13:26.800 even into next year. 0:13:28.400 --> 0:13:31.800 The Fed has a dual mandate, so regardless of what 0:13:31.840 --> 0:13:35.720 the Fed quote unquote can do, the FED, when inflation 0:13:36.080 --> 0:13:39.560 is back down on a sustainable two percent, they're supposed 0:13:39.600 --> 0:13:41.959 to be out of the way. Their goal is not 0:13:42.040 --> 0:13:44.080 to lean on nor is it their mandate to lean 0:13:44.160 --> 0:13:47.160 on the economy as long as possible. So I think 0:13:47.240 --> 0:13:50.280 that's you know this, today is a good day in saying, hey, 0:13:50.320 --> 0:13:53.320 we're not creating towards a recession that could lead to 0:13:53.360 --> 0:13:56.800 really fast cuts, very disruptive. Right, and yet I don't 0:13:56.840 --> 0:13:58.920 think there's anything here that says, oh, the Fed's gonna 0:13:58.920 --> 0:13:59.719 wait until next year. 0:14:00.000 --> 0:14:02.160 Okay. Clouding that one final question, we need to go 0:14:02.240 --> 0:14:06.280 to Claudia Sam territory. Claudia Sam, you know that the 0:14:06.440 --> 0:14:11.720 Science Diet CD stress bag for cat food it's a moonshot. 0:14:12.000 --> 0:14:14.960 It was one hundred dollars for an eighteen pound bag, 0:14:15.400 --> 0:14:18.040 and that puppies pop on one hundred and fourteen dollars. 0:14:18.400 --> 0:14:21.320 I'm seeing the same thing for the for vet bill 0:14:21.400 --> 0:14:25.480 and kennel feet as well. Claudia Sam, you're seeing inflation 0:14:26.200 --> 0:14:28.000 in your cat food discuss. 0:14:29.880 --> 0:14:31.400 Yeah, so I think I'm doing what a lot of 0:14:31.440 --> 0:14:34.240 Americans are. When things get more expensive, you go switch 0:14:34.280 --> 0:14:37.120 to a cheaper brand. Puffy, my kitty, She's more than 0:14:37.200 --> 0:14:39.560 happy to eat drive Purina cat food. It was on 0:14:39.680 --> 0:14:40.440 sale last week. 0:14:40.720 --> 0:14:45.479 There we go, Doctor Sam, Doctor Sam, how the substitution 0:14:45.720 --> 0:14:50.040 affect Puffy is Parina catfood. Just man's going to walk 0:14:50.080 --> 0:14:52.680 out of the studio, Doctor Sam, Thank you so much 0:14:52.720 --> 0:14:57.440 for joining us in congratulations, without question, the most influential 0:14:57.560 --> 0:15:10.200 academic economist, one of our interns. 0:15:10.280 --> 0:15:13.880 Bennett's killed it today with guest sequence, because right now 0:15:13.920 --> 0:15:17.120 we're gonna look a much more almost philosophically at what 0:15:17.280 --> 0:15:22.360 this boom labor economy means forward for your investments. Nicholas 0:15:22.400 --> 0:15:26.440 cohosts co founder Data Truck Research, and joins this morning. 0:15:26.960 --> 0:15:29.000 You know, Nick, there was a phrase from another time 0:15:29.080 --> 0:15:33.400 in place that it's a morning in America. I guess 0:15:33.480 --> 0:15:37.000 it's a morning in America for a select group. How 0:15:37.160 --> 0:15:39.880 narrow are the halves right now in America? Bang up 0:15:40.000 --> 0:15:43.360 jobs report, bang up consumption. We see it across the 0:15:43.440 --> 0:15:47.280 Tri state area. But how are the havelves doing as 0:15:47.320 --> 0:15:48.240 we go into the summer. 0:15:49.800 --> 0:15:52.680 Surely the halves are having it all. I mean, it's 0:15:52.720 --> 0:15:55.320 a very good market. It's a very good economy for 0:15:55.440 --> 0:15:58.160 the upper twenty percent of the income distribution. But let's 0:15:58.200 --> 0:16:01.160 be fair, it usually is right the wealthy tend to 0:16:01.200 --> 0:16:03.760 have an easier time of it. The bottom eighty percent 0:16:03.880 --> 0:16:05.880 have not had an easy time of it. And we 0:16:05.960 --> 0:16:09.840 see that in data like gasoline consumption. For example, gasoline 0:16:09.840 --> 0:16:12.360 consumption has actually been down year over year for the 0:16:12.480 --> 0:16:15.160 last two months. So as much as the top twenty 0:16:15.200 --> 0:16:17.440 percent are doing well. There is a lot of stress 0:16:17.520 --> 0:16:18.600 in the broader market. 0:16:18.920 --> 0:16:21.720 Paul Sweeney, bank Rade, thirty year mortgage seven point five 0:16:21.960 --> 0:16:26.040 six April twenty fifth, and then two cups of coffee. 0:16:26.080 --> 0:16:28.080 We're down to seven point twenty five percent. 0:16:28.280 --> 0:16:30.640 Yeah, yeah, still not where we needed to go for 0:16:30.680 --> 0:16:32.920 a lot of folks. So, Nick, given some of the 0:16:32.960 --> 0:16:35.600 economic data we've seen, and we've got a FED reserve 0:16:35.680 --> 0:16:37.960 that says it is data driven, how do you think 0:16:38.000 --> 0:16:40.320 this the Fed plays it out over the next several months. 0:16:41.240 --> 0:16:42.960 Oh, I mean, it's pretty clear at this point this 0:16:43.120 --> 0:16:46.239 Job's report doesn't leave a lot of room for interpretation. 0:16:46.800 --> 0:16:49.640 Let's put it that way. The economy, labor market's still strong. 0:16:49.720 --> 0:16:52.880 Demand for labor is still strong, wages are still strong. 0:16:53.600 --> 0:16:56.280 They have to at best be on hold. Which is 0:16:56.440 --> 0:16:58.440 interesting to see how many dots are how many cuts 0:16:58.440 --> 0:17:01.040 they put into the plot next week. I'm guessing it's 0:17:01.120 --> 0:17:03.440 one now, not two. And they've got to play it 0:17:03.480 --> 0:17:05.920 pretty close to the vest and acknowledge the fact that 0:17:06.680 --> 0:17:08.520 as much as they want to see the economy slow 0:17:08.600 --> 0:17:11.320 and wages slow and inflation slow, it's happening only. 0:17:11.320 --> 0:17:14.720 Slowly, right, Nick, we s the two year Treasury of 0:17:14.800 --> 0:17:16.880 moving higher by twelve basis points today to four point 0:17:16.920 --> 0:17:19.919 eight four percent. But we've seen all year this equity 0:17:20.000 --> 0:17:23.240 market can perform with rates at those levels, even a 0:17:23.240 --> 0:17:25.359 little bit higher. How do you think about the equity 0:17:25.440 --> 0:17:27.280 market for the remainder of this year? 0:17:28.160 --> 0:17:30.760 You know, I think large caps certainly still fine. The 0:17:30.880 --> 0:17:33.359 semb'f F one hundred, absolutely fine. It's up call it 0:17:33.440 --> 0:17:36.240 twelve percent year to date and the face of higher rates. 0:17:36.280 --> 0:17:38.800 As you point out, we've got the Jenai story, We've 0:17:38.800 --> 0:17:42.040 got Nvidia, We've got all those things pushing large caps higher. 0:17:42.440 --> 0:17:45.200 Small caps not so much. Right, Russell's up what two 0:17:45.280 --> 0:17:48.040 percent year to date? It's telling a very different story. 0:17:48.080 --> 0:17:50.400 It's telling a rate sensitive story, as it always does, 0:17:50.680 --> 0:17:52.840 very good for large caps and kind of not for 0:17:53.000 --> 0:17:53.600 small caps. 0:17:53.920 --> 0:17:56.199 Nick, there's such a respect on the street for your 0:17:56.280 --> 0:18:01.160 research across assets. What is the character of this bull market? 0:18:03.160 --> 0:18:07.639 The character this bull market is very narrow relatively speaking. Actually, 0:18:07.680 --> 0:18:10.400 we just did a piece of clients last night looking 0:18:10.440 --> 0:18:12.920 at the whole decades returned so far, the all of 0:18:12.960 --> 0:18:15.119 the twenty twenties, because let's face it, it should have 0:18:15.119 --> 0:18:16.760 been a really bad decade. It's going to be a 0:18:16.760 --> 0:18:20.720 pretty good decade. But it's narrow. So it's Lewis large caps, 0:18:20.800 --> 0:18:24.000 not small caps. It's Europe is doing okay, but emerging 0:18:24.080 --> 0:18:26.919 markets are not for every India. You've got a China, 0:18:27.560 --> 0:18:30.720 so it's a very narrow rally. And obviously bonds have 0:18:30.800 --> 0:18:33.000 gotten destroyed for the last four and a half years. 0:18:33.520 --> 0:18:35.640 Going forward, I think it will still be narrow. It's 0:18:35.640 --> 0:18:38.560 going to be narrow till us large caps, us technology 0:18:39.040 --> 0:18:41.280 and hopefully we get enough of a pullback in rates 0:18:41.320 --> 0:18:42.240 to get bonds to work. 0:18:42.600 --> 0:18:44.639 But I can't say enough Paul, how this is a 0:18:44.760 --> 0:18:47.920 Nick Coolis difference. And then we have so many people 0:18:48.160 --> 0:18:53.800 rationalizing and destroyed bond market priced down, yield up four five, 0:18:53.960 --> 0:18:58.760 six standard deviations by looking at spreads, looking forward, forget 0:18:58.840 --> 0:19:02.360 the past. What I hear in emails and on YouTube. 0:19:02.880 --> 0:19:06.080 So many people are underwater in some way or form 0:19:06.480 --> 0:19:06.840 with them. 0:19:06.880 --> 0:19:09.160 Let's top the clawback to what happened from twenty twenty two. 0:19:09.240 --> 0:19:11.159 But Nick, I go out and buy it to your treasury. 0:19:11.200 --> 0:19:14.119 I'm getting near five percent here today. What's wrong with 0:19:14.160 --> 0:19:15.280 buying some fixed income. 0:19:15.080 --> 0:19:17.720 Here these days? I think you're right. I think it's 0:19:17.720 --> 0:19:19.840 a great trade. I think two years are probably the 0:19:19.920 --> 0:19:22.880 easiest trade on the planet right now. Five percent risk free, 0:19:23.480 --> 0:19:26.160 no need to worry, no need to fuss. Maybe maybe 0:19:26.359 --> 0:19:28.680 US equities do ten, but you're getting five for doing 0:19:28.720 --> 0:19:31.600 absolutely nothing and taking no risks. So fives feel pretty good. 0:19:32.040 --> 0:19:34.359 The interesting part of the curve, obviously is ten to thirties. 0:19:34.680 --> 0:19:36.760 What do we do with TLT or the long range 0:19:36.800 --> 0:19:38.240 of the curve? And I think you can own that 0:19:38.320 --> 0:19:40.840 section of the curve here. I don't see inflation rich 0:19:41.000 --> 0:19:43.560 ricocheting higher again, and I think you'll make a little 0:19:43.600 --> 0:19:46.240 bit after inflation, even at the long range of the curve. 0:19:47.200 --> 0:19:50.320 Hey, Nick, so in the equity markets, you talked about 0:19:50.359 --> 0:19:52.639 the breath or the lack thereof breath. I mean I 0:19:52.760 --> 0:19:55.119 learned in business school that's not a good thing. I mean, 0:19:55.240 --> 0:19:58.040 doesn't this market have to see a broadening out here 0:19:58.320 --> 0:20:01.240 or we're set up for maybe a big fall somewhere 0:20:01.280 --> 0:20:01.760 along the line. 0:20:02.680 --> 0:20:04.760 You know, it's it's a great question, and you're right. 0:20:04.840 --> 0:20:07.160 I mean, the classic theory is, you know, you want real, 0:20:07.359 --> 0:20:10.080 the broad broad based. We just don't have a broad 0:20:10.119 --> 0:20:12.639 based equity story right now. We have one thing. We 0:20:12.720 --> 0:20:16.120 have Generative AI. We have one stock we have in Nvidia, 0:20:16.240 --> 0:20:21.480 and so the philosophical or the fundamental leadership here is sound. 0:20:21.600 --> 0:20:24.520 It's a good idea. Jennai is a powerful trend, but 0:20:24.600 --> 0:20:26.119 there's not a lot of ways to play it. So 0:20:26.240 --> 0:20:28.359 you have a very narrow set of leadership as basically 0:20:28.400 --> 0:20:30.800 as we all know five names. So I don't think 0:20:30.800 --> 0:20:34.080 that's necessarily unhealthy, but it does mean like small caps 0:20:34.119 --> 0:20:36.639 aren't way to play Jenny. I there's no there's very 0:20:36.680 --> 0:20:38.399 few Jennai plays in small caps. You've got to go 0:20:38.560 --> 0:20:39.080 large caps. 0:20:39.320 --> 0:20:41.440 Nick on a reading list this weekend for all of 0:20:41.560 --> 0:20:44.560 Wall Street. It's Michael Morbison over at Morgan Stanley doing 0:20:44.640 --> 0:20:47.440 a wonderful study. I have already read it, folks on 0:20:47.640 --> 0:20:52.119 concentration in the market, Nick call Us, how to mere mortals, 0:20:53.359 --> 0:20:56.960 I mean, forget about the phrase a carefully diversified portfolio 0:20:57.520 --> 0:21:02.040 or balanced portfolio, all this mumbo jumbo from thirty years ago. 0:21:02.880 --> 0:21:07.159 How do you partake, Nick Cholis? Given the concentration that 0:21:07.320 --> 0:21:08.760